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Employees or Business Owners: Who Really Makes More Money?

By Ian Klaes

According to the book I recommend to anyone interesting in franchising, The Educated Franchisee, by Rick Bisio, one of the most common questions that people ask when they decide whether to go into business is why should they start a business when they can make more money as an employee. But one of the major points for opening your own business is to shatter the glass ceiling on your earning potential. So, who really makes more money: employees or business owners?

Employee Salary

As an employee, you are paid immediately for the work that you do, and you may receive additional value, like a company car, club membership, and healthcare packages. The perks of being an employee sound great when contrasted with the hard work and countless hours that go into business ownership.

In the short term, the answer will always be the employee makes more money. As a business owner, you walk away from a comfortable salary and invest a sizable amount of your capital into a business. Losing access to that capital will have you making less money for the short-term future.

If you stop moving forward at this point, you are like the majority of people who start to investigate business ownership. You look at the immediate facts in front of you and draw a conclusion that makes staying an employee a safe and logical choice.

However, what if you have a conversation, read a news article, or see a social media post and learn about someone like you that has made the decision to become a business owner, and is now realizing success? You might start to questions your initial decision and beliefs. That's because in the long-term, a business owner has the potential to make more money and reap additional benefits.

Business Owner Benefits

If you are like many Americans, you have only ever worked as a salaried employee in a corporate setting. From this perspective, it can be hard to understand why entrepreneurs choose to leave corporate jobs to pursue businesses that may or may not succeed. But business owners have a lot to gain — even in the first few years of entrepreneurship.

Tax Benefits

During the first year of  being a business owner, you will need investment capital and will likely make less than if you had stayed at your job as an employee. However, business owners immediately receive other tax benefits like the ability to purchase large items, like cars as business expenses, and write off expenses, such as child care. Many people don't realize that the government wants to stimulate the health of small businesses by offering significant tax advantages to small business owners.

Retirement & Healthcare

As an owner, you will enjoy perks like being able to set up your own retirement program and direct more money to retirement than would have been possible in a corporate matching program. You would also have the freedom to choose your own health care plans instead of being forced to choose what an employer offers.

Asset

As your business grows, you will create asset value, and you can sell your busintss to make profit or continue to improve the value. Hopefully, you will be able to build your business as an asset within the first few years. This helps individuals increase their net worth significantly, while the employee continues to have low risk and limited potential for future growth.

The shift from the "salary mentality" of an employee to the "asset creation mentality" of the business owner can help you see how making sacrifices initially in your new endeavor can start you on the road to wealth creation. Only business owners have the ability to create something of value that can be passed along to the next generation.

If you can change the way you look at "how much do you make" and take on a certain amount of risk to working for yourself, you may be a good fit as a franchisee for Caring Senior Service. Your first step is scheduling a quick call to see if our franchise might be a good fit for your skills, goals, and competencies. Reach out to us today!

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Tags: Finances, Franchise Ownership